FERC Order No. 1000 Rehearing

This past Monday, August 22, 2011 marked the final day for filing a request for rehearing of Order No. 1000, FERC’s landmark rule on transmission planning and cost allocation. As I predicted here, Order No. 1000, like other rules of similar stature drew a substantial number of rehearing requests. All in all, 63 commenters — nearly one third of the more than 200 entities that originally commented on the rule — asked the Commission to clarify, amend or vacate certain aspects of the Final Rule.

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Also as I predicted, most of the rehearing requests — at least those that stand a real chance of making a dent — focused on the trouble-spots that I identified earlier, such as FERC’s authority to require consideration of state public policy in transmission planning or do away with incumbents’ right of first refusal, particularly when doing so, as Commissioner Moeller pointed out, necessitated waiver of potential violations of NERC reliability requirements that could result from a non-incumbents’ abandonment of a transmission project. Here’s the break-down on the number of times various key words (issues) have been mentioned throughout the proceeding to date – with further analysis after the jump:

I haven’t yet had time to comb through all of the rehearing requests (though you can obtain a bundled information product that I created with an annotated version of Order No. 1000, comments, replies and rehearings for free here), but here are a few quick observations:

Given the controversy over rights of first refusal, I was surprised that more commenters didn’t capitalize on Commissioner Moeller’s dissent. In a significant number of FERC cases that have been reversed on appeal, at least one Commissioner typically dissented from the original order. In 2010, the DC Circuit remanded a case where the FERC majority failed to respond to reasonable concerns raised by a dissenting Commissioner. But even prior to that decision, there’s been a rich tradition of cases from Kamargo (oh, does anyone recall those scathing Trabandt dissents? He was the Justice Scalia of FERC) to Piedmont Environmental Council (with Commissioner Kelly dissenting on the issue where FERC lost at the Fourth Circuit) and others where federal circuit courts reversed or vacated a less than unanimous FERC decision. Because of the complexity of FERC cases, they’re awfully tough to follow – and so a dissenting opinion by a Commissioner gives the judges a clear roadmap to the opposing view.

I was also surprised by the number of appeals filed either by in-house counsel or even non-lawyers. Used to be most parties, except for the real mom-and-pops, would retain counsel to file rehearing at FERC. My guess is that most parties can’t justify the expense of outside counsel given the low likelihood of FERC reversing at this stage. For those parties that really oppose the decision, devoting resources to pushing for a legislative fix may be a preferred approach in light of the attention that FERC’s order has attracted on the Hill.

Even as most commenters argued on rehearing that the rule goes too far and exceeds FERC’s authority, others assert that FERC didn’t go far enough. For example, one of the comment sets filed by AWEA and several others says that FERC erred in declining to permit (or mandate?) allocation of costs outside of a region where those in the other region receive benefits but do not voluntarily agree to assume the costs. Generally speaking, arguments that FERC should have chosen one policy option over another are DOA on judicial review. The reasonableness standard, under which FERC’s policy choices are reviewed – isn’t very difficult to meet so long as there’s at least some evidence underlying FERC’s rationale. So long as FERC has some basis for adopting the course that it chooses, even if the contrary arguments are stronger, a court will affirm FERC’s decision.

In this instance, FERC’s declined to allow transmission providers to allocate costs to beneficiaries outside of the region. Though FERC recognized that doing so could result in a windfall to these beneficiaries, FERC explained that requiring beneficiaries outside of a region to bear costs would impose a heavy burden of participating in transmission planning across several regions.

By contrast, arguments that FERC went too far (rather than FERC did not go far enough) stand a stronger chance of winning on appeal. The “went-too-far” line of argument attack FERC for exceeding its authority, which is a legal/statutory matter over which federal agencies have far less deference than making a policy choice.

So what happens next? For starters, there won’t be any late rehearing requests – the 30 day filing deadline is mandated by Section 313l(a) of the Federal Power Act and as such, it can’t be waived. Moreover, because parties are required to seek rehearing before going to court, only those 53 entities (with very limited exceptions) that filed rehearing requests are eligible to seek judicial review of FERC Order 1000. In the meantime, the rehearing requests do not stay the proceeding (I’m not sure if any parties have asked for a stay at this time) which means that the entities subject to Order No. 1000 must start makings their way towards compliance. And in fact, given the pace at which FERC, and then a court, decide the rehearing requests, as well as possible petitions for review, it is likely that at least some of these matters will be pending when October 2012, the compliance deadline for development of a transmission plan, rolls around.